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On December 9, China Food and Drug Administration (CFDA) released the draft Regulation on the Implementation of the Food
Safety Law of the P.R. China[1] (hereinafter "Regulation") for public comments by January 8, 2016. This extensive
Regulation includes 200 articles, detailing issues surrounding the implementation and enforcement of the Food Safety Law (hereinafter "Law"),
which entered into force in October of this year. This draft Regulation, once adopted, will have a significant impact on overseas food
producers and operators, especially for those in the industry of health food and infant formula. It also further defines some key terms
to the food industry, e.g., edible agricultural product, food in special dosage forms with unified consumption amount, food repacking,
and food in bulk.

In the next few weeks, we will walk you through important sections of the Regulation and focus on different topics via our e-newsletter,
"China Regulatory Matters." This issue will provide you with a snapshot of the articles in the Regulation that will likely have a major
impact on the food import business, particularly foods imported into China that have been under a high level of scrutiny, such as health
food and infant formula.

I. Government Management of Imported Food

The Regulation is designed to establish a management system of food import per food category and safety risk level, taking into account
various factors (e.g., food safety risk, safety control capability of the enterprise, and food safety condition of the exporting
country/region).
[2] For food, food additives and food related products
[3] at high risk level, samples will be retained
and tested under entry inspection; for products with ordinary risk, sampling testing will be carried out; and for products with low
risk, only on-site inspections will be conducted.
[4]

Food incidents taking place overseas (e.g., food recall in foreign countries) may result in further control measures (e.g., import
restriction, import suspension, goods returned or destruction, etc.) by the Chinese authorities.
[5]

II. Foreign Food Producers, Exporters and Chinese Food Importers

The Regulation also sheds more light on product compliance by foreign food producers/exporters and local importers. For example, Article
112 requires foreign food producers/exporters to prevent any deliberate destruction by others to food and edible agricultural products via
chemical, biological or physical means at different stages of food production and operation (e.g., raw material control, production,
packaging, storage and transportation, etc.).

Furthermore, local food importers are under an obligation to establish a regime to audit the food producer and exporter overseas.
[6]
Details regarding the design and function of the audit system can be found in the
Administrative Measures for the Audit and Inspection
of Overseas Companies by Food Product Importers (draft for comment)
.
[7]
published by the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) in September this year. In short, the draft
Measures impose heavy responsibilities on the local importer to ensure the safety of food products that they plan to distribute in China. At
least once in every three years, domestic food
importers are obliged to conduct on-site audit of facilities outside of China that produce, for example, health food, infant formula, formulation
food for special medical purposes and meat products. Such on-site inspection can be authorized to an accredited third party
(see:
Keller and Heckman China Regulatory Matters: China's Food Safety Law Takes Effect Today: Are You Ready
).

III. Specially Controlled Food Products

According to the amended Law, pre-market approval (i.e., notification or registration) from the Chinese Government is a prerequisite to the
distribution and operation of health food, infant and young children formula food and foods for special medical purposes (hereinafter "specially
controlled food products") in China.

The Regulation uses the term 'food in special dosage form with unified consumption amount' to capture all food in the form of capsule, tablet,
liquid oral dosage, medicinal granules, etc., which is subject to a pre-set daily intake amount or consumption amount.
[8]
We expect
to see more detailed rules published by the Chinese government in the future in terms of its regulation of food in special dosage form.

With regard to imported products, "health food imported for the first time" suggests no health food made per the same formula has been
imported from the same country and the same producing company in the past.
[9] When the health food is imported for the first time,
it must be registered with CFDA in advance, unless it falls under the scope of vitamins and minerals, which are only subject to notification
procedures. Once the notification number is issued to a health food to be imported, the actual import must be carried out within three months and
the proof of customs clearance as well as the testing report must be filed with the food and drug administration at the provincial level.
[10]

Since infant and young children formula food have repeatedly fallen under the spotlight in various food scandals in China, the Regulation
includes many articles intended to address issues related to the production and operation of infant formula as well as product registration/notification
procedures.

More specifically, the Regulation requires infant and young children formula to be developed in accordance with Chinese regulations and standards. In
principle, one company shall not have more than 3 series of products and 9 product formula. Substances that are subject to optional additions (e.g., choline,
inositol, taurine in infant formula) cannot be reflected in the product name of infant and young children formula.
[14] Imported formula of milk
powder for infants and young children, per Article 90, must be registered.

Further, prior to the marketing of infant and young children formula food, the producer must notify relevant authorities of the information regarding
product raw materials, food additives, formula and product label.
[15] Article 47 imposes an obligation for review of formulation registration
certificate on the operator of infant and young children formula where applicable.

IV. Food Labeling

Given a large amount of noncompliant food issues arise from the product label, the Regulation elaborates on food labeling issues in various chapters. Of
particular note is the proposed prohibition of sticker use on imported food products. Under the draft Regulation, all prepackaged food must be directly
printed with a Chinese label before it is imported to China.
[16] Additionally, food shall not be labeled with any pre-set amount of consumption
or designated daily consumption, unless it is a health food, infant and young children formula food or foods for special medical purposes.
[17]

Claims such as "non addition of" or "non-use of" substances that are prohibited in pertinent food safety national standards are to be banned. For example,
colostrum is currently banned in infant formula.
[18] Accordingly, under the draft Regulation, "no addition of colostrum" is not a permitted
claim on the label of an infant formula milk powder product. Similarly, GMO food or raw materials that have not yet been approved by the Chinese government
shall not bear a "non-GMO" label.

The draft Regulation, for the first time, clearly defines "defects with food label," which refers to non-compliance which has no impact on food safety and
will not mislead consumers in their safe consumption of food (e.g., spacing between letters, font size, use of simplified or traditional characters and
rounding intervals, etc.).
[19] Under the updated Law, a food label with a defect no longer constitutes a cause for consumer compensation of ten
times the purchasing price or three times the loss.
[20] However, food labels or instruction manuals non-compliant with food safety national
standards can become the subject of a Class III food recall even if no health damage is expected.
[21]
Notably, under a Class III recall, a food
possessing a non-compliant label can continue to be sold as long as the label is fixed, mitigation measures have been taken to guarantee product safety,
and public notice has been given about the mitigation measures.
[22]

V. Cross-border E-Commerce

Nowadays, "cross-border e-commerce" (CBEC) has become a term commonly used in the food industry, particularly as it relates to the import and export of
food to China. The Regulation, under Article 117, explicitly mandates food imported via CBEC shall follow the Law and the Regulation. In the meantime,
the Regulation authorizes the quality supervision inspection and quarantine department under the State Council with other relevant departments to jointly
establish the rules for supervision and management of imported food, food additives and food related products via CBEC.
[23]

In fact, this October, AQSIQ published Supervision and
Management Rules for the Safety of Imported Food via Cross-border E-commerce in Online
Shopping Bonded Mode (draft for comment)
[24] to regulate the operation and safety supervision of imported food that is delivered to bonded warehouses
via CBEC and then redistributed to Chinese consumers upon individual orders.

VI. Food Repackaging and Toll Manufacturing

Food repackaging is a very common practice among food importers and distributors, and the Regulation newly defines this action and establishes
some restrictions. Notably, at the stage of food operation, if food in large packs is redistributed into small units for sale without repackaging,
it does not fall under the definition of "food repackaging."
[25] When a food operator repackages food, no modification to the production
date or extension of the shelf-life is permitted.
[26]

In the toll manufacturing of food or food additives, while the toll manufacturer must obtain a production license and be responsible for the
production activity, the company procuring the tolling service is ultimately responsible for the food safety.
[27]

VII. Transportation

Following up on the amended Food Safety Law, which expands its scope of regulation to cover food transportation and storage, the Regulation in
several articles focuses on the qualification of logistic companies and warehouses in the food business. Food companies doing business in China
should carefully select their local partners. By way of example, food producers/operators are obligated to examine the storage/transportation company's
capability in guarantying food safety.
[28]
A written contract must be reached in commissioned food storage and transportation, describing each
party's obligations to comply with the food safety requirements in China.
[29]